A&W FOOD SERVICES OF CANADA INC. ANNOUNCES FIRST QUARTER RESULTS FOR FISCAL 2025 AND UPDATED 2025 OUTLOOK

VANCOUVER, BC, May 2, 2025 /CNW/ - A&W Food Services of Canada Inc. (TSX: AW) ("A&W", "Food Services", "we" or "our") today announced its financial results for the 12-week period ended March 23, 2025.

All references to "Q1 2025" are to Food Services' 12-week period ended March 23, 2025; and to "Q1 2024" are to Food Services' 12-week period ended March 24, 2024.

"We opened 7 new A&W restaurants and grew System Sales⁽ⁱ⁾ by 2% in Q1 2025, despite the impact of severe weather conditions on guest counts in many Canadian communities, particularly acute in period two of the quarter," said Susan Senecal, Chief Executive Officer. "During the quarter, we achieved positive same store sales growth of 0.4% which is positive given that the first quarter was the strongest quarter of 2024 in terms of same store sales growth. This reflects our efforts to provide more value offerings in 2025 given the shift in consumer pressures and slowdown in the economy that started mid-year last year. In Q2, we continue to navigate adverse weather and uncertain economic conditions due to recent tariffs and counter-tariffs but are pleased with the performance of our value offerings and marketing initiatives in this last quarter and in their ability to better appeal to value-conscious guests. We are proud to be fully Canadian owned and operated, now more than ever, and have been happy to see many Canadians discovering or re-discovering this fact. I am thrilled that we launched A&W Rewards, our new loyalty program, on April 22nd, after the end of Q1. This program gives guests even more reason to visit A&W and we are excited for the contribution it can make to our growth in the digital space, an important segment for QSR. Now, more than ever, with so much macro economic uncertainty we are also pleased with our progress through the end of Q1 2025 on our strategic path to achieving 30% profitability improvement for our franchisees by 2028." concluded Ms. Senecal.

Q1 2025 FINANCIAL HIGHLIGHTS
(as compared to Q1 2024)

• System Sales⁽ⁱ⁾ of $396.9 million increased by $7.7 million (2%)
• Revenue increased by $2.4 million (4%)
• Income before income taxes increased by $3.0 million (31%)
• Adjusted EBITDA⁽ⁱ⁾ was $19.4 million, consistent with Q1 2024
• Operating costs increased by $4.4 million (15%), largely attributable to increased marketing-related costs incurred by A&W's National Advertising Fund
• General and administrative expenses decreased by $0.3 million (3%)
• Cash Dividend of $0.480 per share declared March 5, 2025 and paid March 28, 2025
• Opened 7 new A&W restaurants

(i)	System Sales and Adjusted EBITDA are non-IFRS financial measures. Please see the "Non-IFRS Measures" section of this news release for further details.

Q1 2025 RESULTS

(in thousands of Canadian $)	Q1 2025		Q1 2024
Financial Summary
Revenue from franchising	55,926		53,426
Revenue from corporate restaurants	5,207		5,355
Total revenue	61,133		58,781
Operating costs	(33,926)		(29,547)
General and administrative expenses	(10,894)		(11,183)
Royalty expense	-		(11,553)
Net finance expense	(3,869)		(485)
Amortization of deferred gain	-		880
Share of income from associates	-		2,575
Income before income taxes	12,444		9,468
Income tax expense	(3,187)		(1,958)
Net income	9,257		7,510
Net cash generated from operating activities	507		11,810
Other Metrics
System Sales^(i)	396,924		389,269
System Sales Growth^(i)	2.0 %		2.0 %
Same Store Sales Growth^(i)	0.4 %		0.6 %
Net annual restaurant unit growth^(ii)	1.8 %		1.3 %
Adjusted EBITDA^(i)	19,436		19,352

^(i)	System Sales, System Sales Growth, Same Store Sales Growth, and Adjusted EBITDA are non-IFRS financial measures, non-IFRS ratios and supplementary financial measures. Please see the "Non-IFRS Measures" section of this news release for further details.

On October 17, 2024, A&W completed a transaction (the "Transaction") in which Food Services indirectly acquired the trademarks used in the A&W business in Canada through the acquisition of all of the units of A&W Revenue Royalties Income Fund which it did not already own. Due to the Transaction, the financial results for Q1 2025 are not directly comparable to the financial results for Q1 2024.

For further information regarding the Transaction, please refer to Food Services Q1 2025 Management Discussion and Analysis ("MD&A"), Food Services Annual MD&A for the 52-week period ended December 29, 2024 and the Fund's management information circular dated August 29, 2024 available on the Fund's SEDAR+ profile at www.sedarplus.ca.

Income before income taxes increased by $3.2 million in Q1 2025, as compared to Q1 2024, largely as a result of the cessation of the royalty expense following the completion of the Transaction and secondarily by and increase in revenue, partially offset by an increase in operating costs and net finance expense as well as the cessation of the income from associates and amortization of deferred gain following completion of the Transaction.

The $2.4M increase in total revenue is attributable to franchising revenue which was higher primarily due to higher equipment sales as a result of an increase in the number of A&W restaurants modernized during Q1 2025 as compared to Q1 2024. System Sales⁽ⁱ⁾ for Q1 2025 of $396.9 million were up 2.0% from Q1 2024 System Sales⁽ⁱ⁾ of $389.3 million. Franchising revenue from service fees, contributions to the National Advertising Fund and revenue generated from the distribution of food and supplies fluctuate with the movement in System Sales and as such, were up slightly quarter over quarter. Initial franchise and renewal fees were down quarter over quarter due to a lower volume of restaurants sold and turnkey revenue was down in Q1 2025 versus Q1 2024 due to lower costs of construction for the A&W restaurants that Food Services built turnkey for franchisees in Q1 2025 as compared to Q1 2024.

Same Store Sales Growth is a function of changes in guest counts and check size, which are impacted by party size, menu prices and menu mix and changes in consumers discretionary spending. The Same Store Sales Growth⁽ⁱ⁾ of 0.4% for Q1 2025 is attributable to an increase in average check size due in part to industry-wide inflation on goods, services, and labour, partially offset by a decrease in guest counts in certain geographical regions that experienced severe weather conditions in Q1 2025.

Revenue from corporate restaurants was down slightly from Q1 2024 due to periods of severe weather in Ontario during Q1 2025 that negatively impacted guest counts.

Food Services reported net income of $9.3 million in Q1 2025 compared to net income of $7.5 million in Q1 2024 due to the factors discussed above and a $1.2 million increase in income tax expense due to an increase in taxable income which is largely due to the cessation of the royalty expense. The amortization of deferred gain and income from associates recognized in Q1 2024 were not taxable and therefore diluted the effective tax rate in Q1 2024.

Food Services reported net income per share of $0.37 in Q1 2025 versus net income per share of $0.50 in Q1 2024 due to the increase in the weighted average number of shares outstanding from 9.5 million in Q1 2024 to 24.0 million in Q1 2025 as a result of the Transaction, partially offset by the increase in income attributable to shareholders of Food Services.

In order to improve comparability of net income per share, the number of shares used to calculate the net income per share for Q1 2024, has been adjusted to reflect the equivalent number of common shares of Food Services that were outstanding after the reorganization that was undertaken as part of the Transaction.

Adjusted EBITDA⁽ⁱ⁾ for Q1 2025 was $19.4 million and consistent with Adjusted EBITDA for Q1 2024 as the increase in revenue and decrease in general and administration expenses were offset by increased operating costs, excluding depreciation and other items included in general and administration expenses and operating costs that are added back for the purposes of calculating Adjusted EBITDA.

In Q1 2025 Food Services declared a cash dividend of $0.480 per share and is committed to maintaining that level of dividends for the balance of Fiscal 2025.

^(i)	System Sales, System Sales Growth, Adjusted EBITDA and Same Store Sales Growth are non-IFRS financial measures, non-IFRS ratios and supplementary financial measures. Please see the "Non-IFRS Measures" section of this news release for further details.

Full quarterly results are available on Food Services' SEDAR+ profile at www.sedarplus.ca.

2025 UPDATED OUTLOOK
Subsequent to the end of Q1 2025, on April 3, 2025 the U.S. Government announced sweeping tariffs on goods imported into the U.S. from a variety of trading partners, including Canada. As a result, the Canadian government announced retaliatory tariffs on U.S. originated imports into Canada becoming the first of many announcements related to tariffs by both countries that has served to create significant market uncertainty and increase the probability of these measures having significant impacts on Canadian unemployment rates, consumer confidence and discretionary spending, and the Canadian economy more broadly.

As a result of these macroeconomic conditions, we have updated our 2025 outlook for Adjusted EBITDA, System Sales Growth and Same Store Sales Growth downward from what was presented in Food Services' Annual MD&A for the 52-week period ended December 29, 2024. Due to the pace at which we are opening new A&W restaurants we have amended the 2025 outlook for total number of restaurants expected to be open by the end of Fiscal 2025 upwards from what was presented in Food Services' Annual MD&A for the 52-week period ended December 29, 2024. We now expect the following for Fiscal 2025:

• Adjusted EBITDA⁽ⁱ⁾ to be between $96 million and $101 million ($93.5 million in Fiscal 2024, Income before income taxes of $50.0 million in Fiscal 2024);
• Total A&W restaurants to be between 1,085 and 1,100 by the end of Fiscal 2025 (1,073 by end of Fiscal 2024);
• Annual System Sales Growth⁽ⁱ⁾ of 1.5% - 4.5% (0.8% in Fiscal 2024); and
• Annual Same Store Sales Growth⁽ⁱ⁾ of 0.0% - 3.0% (-0.6% in Fiscal 2024).

CONFERENCE CALL
A&W will hold a conference call to discuss its Q1 2025 results on Monday, May 5, 2025 at 1:00 p.m. Pacific Time (4:00 p.m. Eastern Time).

The call will be webcast live and may be accessed at https://events.q4inc.com/attendee/982011185. Participants who wish to ask questions or are unable to join via webcast may dial-in by calling toll-free 1-800-549-8228 and by quoting the conference ID "38530" when prompted by the operator. For those unable to participate in the live call, a replay will be made available for one year at https://events.q4inc.com/attendee/982011185.

NON-IFRS MEASURES
This news release makes references to certain non-IFRS measures. These measures are provided as additional information to complement those IFRS measures by providing further understanding of our results of operations from management's perspective. Food Services believes that disclosing these non-IFRS measures provides readers of this news release with important information regarding Food Services' financial performance. By considering these measures in combination with IFRS measures, Food Services believes that readers are provided with additional and more useful information about Food Services than readers would have if they simply considered IFRS measures alone. We use non-IFRS financial measures including "System Sales", "EBITDA", and "Adjusted EBITDA"; the non-IFRS ratio of "System Sales Growth" and non-IFRS supplementary financial measures such as "Same Store Sales Growth".

These non-IFRS measures, ratios and supplementary financial measures are used to provide investors with supplemental measures of our operating performance and thus highlight trends in our core business that may not otherwise be apparent when relying solely on IFRS measures. We believe that securities analysts, investors and other interested parties frequently use non-IFRS measures and industry metrics in the evaluation of issuers. A&W's management also uses non-IFRS measures and industry metrics to facilitate operating performance comparisons from period to period, to prepare annual operating budgets and forecasts and to determine components of management compensation. The non-IFRS measures reported by Food Services do not have a standardized meaning prescribed by IFRS and Food Services' method of calculating these measures may differ from those of other issuers or companies and may not be comparable to similar measures used by other issuers or companies. Accordingly, these measures should not be considered in isolation or as a substitute for analysis of our financial information reported under IFRS.

Certain information, including definitions, about non-IFRS financial measures, non-IFRS ratios, and supplementary financial measures is found in Food Services Q1 2025 MD&A (and, in the case of Fiscal 2024 results, in Food Services Q4 2024 MD&A) and is incorporated by reference. This information is found in the sections entitled "How We Assess the Performance of our Business", "Non-IFRS Measures" and "Selected Financial Information" of the Q1 2025 MD&A (and, in the case of Fiscal 2024 results, in Food Services Q4 2024 MD&A) which is available on Food Services' SEDAR+ profile at www.sedarplus.ca. Reconciliations for each non-IFRS financial measure can be found below.

(in thousands of Canadian Dollars)

Reconciliation of System Sales to Revenue from Corporate Restaurants:	Q1 2025		Q1 2024
Revenue from corporate restaurants	5,207		5,355
Sales reported by franchised restaurants^(i)	391,717		383,914
System Sales^(ii)	396,924		389,269
Reconciliation of EBITDA and Adjusted EBITDA to Income before income taxes:	Q1 2025		Q1 2024
Income before income taxes	12,444		9,468
Depreciation of plant, equipment, intangible assets and right-of-use assets	1,558		1,340
Amortization of deferred gain	-		(880)
Net finance expense	3,869		485
EBITDA	17,871		10,413
Adjustments to EBITDA:
Income before taxes attributable to non-controlling interest in A&W Beverages	(496)		(323)
Royalty expense	-		11,553
Share of income from associates	-		(2,575)
Net loss on disposal of plant and equipment	23		-
Unrealized (gain) loss on foreign exchange	(8)		8
Stock-based compensation	70		-
Net income impacts created on a deficit related to the National Advertising Fund	1,971		-
Recovery of capitalized costs	(310)		(111)
Start up net losses on Pret	315		387
Adjusted EBITDA	19,436		19,352

FORWARD-LOOKING INFORMATION
Certain statements in this news release contain forward-looking information within the meaning of applicable securities laws in Canada. The words "anticipates", "believes", "budgets", "could", "estimates", "expects", "forecasts", "intends", "may", "might", "plans", "projects", "schedule", "should", "will", "would", "outlook" and similar expressions are often intended to identify forward-looking information, although not all forward-looking information contains these identifying words.

The forward-looking information in this news release includes but is not limited to: the expectations that Food Services will continue to pay dividends at the current level; the impacts of weather and uncertain economic conditions on guest counts in Q2 and Food Services' ability to navigate those conditions; the performance of A&W's value offerings and marketing initiatives and their ability to better appeal to value-conscious guests; the contribution that A&W Rewards will make to A&W's growth in the digital space and its ability to drive guest counts; the continued progress on achieving a 30% improvement in franchisee profitability by 2028; and Food Services' updated 2025 outlook.

The forward-looking information, including 2025 outlook, is based on assumptions that management considered reasonable at the time it was prepared, which assumptions include, but are not limited to:

• there are no changes in availability of experienced management and hourly employees;
• there are no material changes in government regulations concerning menu labelling and disclosure and drive-thru restrictions;
• no incidences of food borne illness;
• no material changes in competition;
• no material impact to supply chain availability, cost of inputs or franchisee ability to operate because of the actual or threatened tariffs;
• no material impact to consumer discretionary spending due to changes in economic conditions including economic recession or changes in the rate of inflation or deflation, employment rates and household debt, political uncertainty, interest rates, currency exchange rates, derivative and commodity prices or actual or threatened tariffs;
• no material increases in food and labour costs;
• the continued availability of quality raw materials;
• continued additional franchise sales and maintenance of franchise operations;
• A&W is able to maintain and grow the current system of franchises;
• Suncor being able to execute their development plan to open new A&W restaurants in their Petro-Canada retail locations;
• A&W is able to locate new retail sites in desirable locations;
• A&W is able to obtain qualified operators to become A&W or Pret franchisees;
• existing franchisees are able to successfully operate and grow their businesses and maintain profitability;
• no material impact from new or increased sales taxes upon gross sales;
• continued ability to preserve intellectual property;
• no material litigation from suppliers, franchisees, key partners or guests at A&W or Pret restaurants;
• Food Services can continue to comply with its obligations under its credit arrangements;
• the projections for the A&W business provided by management are accurate; and
• A&W will be successful in executing on its business strategies and such strategies will achieve their intended results.

Inherent in forward-looking information are risks and uncertainties beyond management's or Food Services' ability to predict or control that may cause actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking information. The forward-looking information in this news release is subject to risks, uncertainties and other factors including, among others, the risks identified in Food Services' Q1 2025 MD&A and Food Services' annual information form for the period ended December 29, 2024, ("AIF") under the heading "Risk Factors". The Q1 2025 MD&A and AIF are both available on Food Services' SEDAR+ profile at www.sedarplus.ca. Additional risks and uncertainties not currently known to Food Services or that are currently not considered to be material also may impair Food Services' business.

All forward-looking information in this news release is qualified in its entirety by this cautionary statement and, except as required by law, Food Services undertakes no obligation to revise or update any forward-looking information as a result of new information, future events or otherwise after the date hereof.

INVESTOR COMMUNICATIONS
For important updates and information regarding A&W, including the timing of future earnings calls, visit A&W's investor relations website at www.awinvestors.ca. A&W uses this website as a primary channel for disclosing key information to its investors.

ABOUT FOOD SERVICES
A&W is a publicly traded company and is the second largest quick-service hamburger restaurant chain in Canada. Operating coast-to-coast, A&W restaurants feature famous trade-marked menu items such as The Burger Family®, Chubby Chicken® and A&W Root Beer®. A&W's shares are listed for trading on the Toronto Stock Exchange in Canada under the trading symbol "AW".

SOURCE A&W Food Services of Canada Inc.

For further information: Kelly Blankstein, Chief Financial Officer, 604-988-2141, Email: [email protected], www.awinvestors.ca